Kenyans Find the Unintended Consequences of Mobile Money

Friday, September 20, 2013

In Western Kenya, “Sambaza” is both a marketing slogan and means for despair. It means “to spread.” Vodafone-owned Safaricom, the dominant mobile provider in Kenya, uses it as a brand name for a service that allows customers to transfer airtime to each other. According to a new study (pdf) funded by the Institute for Money, Technology and Financial Inclusion(IMFTI), the word has also come to refer to the way money in a mobile account slips away, drip by drip, as friends and family ask for favors.

People who work in economic development use the term “unbanked” to describe the roughly one in three people in the world who don’t have a formal bank account. According to the World Bank, the unbanked include almost 60 percent of adults in developing countries and 77 percent of adults making less than $2 a day. In richer countries, banks provide a source of credit and a means of saving to smooth out earnings and accumulate wealth. The World Bank sees bank accounts on mobile phones as a way to give these things to the rural poor, too.

Adopting mobile money, however, is not as straightforward as substituting a phone account for cash in a jar. Developing countries don’t necessarily have a cash economy to begin with. Cash, where it exists, is freighted with social meaning. People who have never had access to banks develop credit and income smoothing without them, through social custom and family ties. A person in Kenya with a brand-new mobile banking account can’t just immediately begin a personal credit history and build equity, the way a young adult would expect to in the U.S. or Europe. You can’t suddenly stop financing through your family or abandon the social rituals attached to gifts, just because you’ve bought a phone.

A paper published in March by the Consultative Group to Assist the Poor, a nonprofit group, looked at text and call data in three African countries to figure out what drives adoption of mobile money. (Growth, the paper noted, “has not been as fast as anticipated.”) The authors discovered a gap between rich and poor. First, you’re more likely to use mobile money if you’re more likely to make calls and send texts. That is, you’re more likely to use mobile money if you’re spending money already anyway. Second, people with more contacts who have mobile money accounts are more likely to have accounts themselves. This is true in each country, regardless of how developed the mobile money market is.